EIA raises Q3 Brent forecast by $11 on Hormuz disruptions

The U.S. Energy Information Administration sharply raised its third-quarter 2026 Brent crude forecast by $11 to $85 per barrel in its August Short-Term Energy Outlook, released August 11, citing continued severe constraints on shipping through the Strait of Hormuz that have kept millions of barrels of Middle Eastern oil production offline.

A Market Reshaped by Conflict

The EIA estimated that Middle East production shut-ins averaged 5.5 million barrels per day in July, with crude oil and petroleum liquids transiting the Strait of Hormuz averaging just 4.9 million b/d in the second quarter of 2026 — down from 21.6 million b/d in the fourth quarter of 2025 before the conflict began. The agency assumes disruptions persist through August before flows slowly increase in September.wionews+1

The forecast revision reflects the collapse of expectations that followed the signing of a U.S.-Iran memorandum of understanding in June. Brent fell as low as $69/bbl on July 2 on optimism over a deal, but renewed attacks on tankers transiting the Strait later in July sent prices surging back above $100 before settling in the high $80s.ogj+1

Saudi Arabia has rerouted crude through its East-West pipeline to Yanbu, while volumes through the Bab el-Mandeb Strait rose to 8.1 million b/d in the second quarter from 5.4 million b/d in late 2025. The EIA forecasts global oil inventories were drawn down by 4.2 million b/d in the second quarter and projects a further 3.8 million b/d decline in the third quarter.ogj

Demand Destruction Compounds the Picture

The EIA's revised outlook landed alongside bearish demand assessments from both OPEC and the International Energy Agency. On Wednesday, the IEA projected global oil demand would contract by 1.6 million barrels per day in 2026, a 510,000 b/d larger decline than its July estimate, according to CNBC. OPEC cut its 2026 demand growth forecast to 580,000 b/d from 780,000 b/d in July, its fourth consecutive downward revision, according to Reuters.reuters+2

Oil prices fell on Thursday as markets digested the demand cuts. Both WTI and Brent declined roughly 2% during European trading hours.investing

Outlook Hinges on Reopening Timeline

The EIA expects Brent to ease to $78/bbl in the fourth quarter as shut-in production restarts, then average $69/bbl in 2027 once most Persian Gulf output returns to pre-conflict levels in early 2027. The agency forecasts approximately 600,000 b/d of production could remain offline through the end of 2027 as some producers face difficulties restoring output.eia+2

President Trump stated Wednesday that the United States has "total control" over the Strait of Hormuz, while negotiations over the waterway remain deadlocked. The EIA's forecast path — and whether prices decline or spike anew — depends entirely on how quickly commercial shipping resumes through a chokepoint that normally carries roughly 20% of global oil supply.wionews+1